Jean-Marie Baland
U. of Namur

Baland

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(Friday, 25th May 2012)

Title : Microfinance from an Organization and Social Capital Perspective

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In microfinance, the success of in group lending is partly based on the strong social connections that unite members of the group. It is believed that the social capital thus created will help groups in disciplining members and enforcing repayments. We will first attempt to better define the concept of social capital in this context, and then will investigate its possible effects on group repayments. In particular, while social sanctions can indeed promote repayment, we will also see that (1) group lending may still be dominated by individual lending, (2) social capital may also promote group collective default and (3) lenders can attempt to exploit social capital at the expense of the borrowers.

Bibliographical references :

Jean-Marie Baland, Rohini Somanathan and Zaki Wahhaj,  Repayment incentives and the distribution of gains from group lending, BREAD Working Paper No. 292, January 2011

Jon de Quidt, Thiemo Fetzer, and Maitreesh Ghatak,  Microfinance, Social Capital, and For-Profit Lending, unpublished working paper

Dean Karlan and Jonathan Morduch, 2011, Access to Finance, Chapter 2, Handbook of Development Economics, Volume 5

Maitreesh Ghatak and Greg Fisher, Spanning the Chasm: Uniting Theory and Empirics in Microfinance Research, in B. Armendariz and M. Labie (ed.s), Handbook of Microfinance, World Scientific, 2011

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